| ...On October 20, 2004 the Internal Revenue Service (IRS)
announced the cost-of-living adjustments (COLA) applicable
to dollar limitations for retirement plans for the 2005
tax year. There are several changes to the 2005 plan
limits resulting from COLA and from the Economic Growth
and Tax Relief Reconciliation Act of 2001 (EGTRRA).
The 2005 plan year retirement plan dollar limits, in comparison
to 2004 are as follows:
INTERNAL REVENUE SERVICE RETIREMENT PLAN LIMITS
LIMIT 2004 2005
Defined benefit maximum annual benefit. [Section 415].
$165,000.00 $170,000.00
Defined contribution maximum annual to an Individuals
account. [Section 415©]. $ 41,000.00 $ 42,000.00
Maximum 401(k), 403(b) & 457 deferral contribution
limits $ 13,000.00 $ 14,000.00
Maximum 401(k) & 403(b) deferral catch-up contribution
limit for participants older than 50. $ 3,000.00 $ 4,000.00
Compensation limits for allocating employer and employee
contributions under a qualified plan. $205,000.00 $210,000.00
Highly compensated employees test. [Section 414(q)].
$ 90,000.00 $ 95,000.00
During the month of October 2004 Social Security announced
that more than 52 million people will receive a 2.7 percent
increase in their monthly benefit payments. The 2.7 percent
hike will begin with benefits that Social Security beneficiaries
receive in January of 2005.
The COLA’s are tied directly to the Bureau of Labor
Statistics’ Consumer Price Index for Urban Wage Earners
and Clerical Workers (CPI-W). Legislation enacted in 1973
provides for annual, automatic cost-of-living adjustments.
This is the 30th straight yearly rise in benefits since
automatic cost-of-living adjustments began in 1975. Before
1975, it took an act of Congress to increase Social Security
benefit payments. The first increase was not authorized
until 1950, 15 years after the original Social Security
Act was passed, and 10 years after the first monthly benefits
were paid.
The 2005 Social Security changes in comparison to 2004
are as follows:
SOCIAL SECURITY CHANGES DUE TO COLA
2004 2005
Maximum taxable earnings - Social Security. $ 87,900.00 $ 90,000.00
Maximum taxable earnings - Medicare NO LIMIT NO LIMIT
Retirement Earnings Test Exempt Amount - Under full retirement age $ 11,640.00
$ 12,000.00
Retirement Earnings Test Exempt Amount - The year an individual reaches full
retirement age. $ 31,080.00 $ 31,800.00
Retirement Earnings Test Exempt Amount - The individual attains full retirement
age. NO LIMIT NO LIMIT
Maximum Social Security Benefit - Worker Retiring at full retirement age. $1825/mo
$1939/mo
NOTE:
The estimated average monthly Social Security Benefits
effective January 2005 for an aged couple, both receiving
benefits is in the amount of $ 1,574.00.
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